FYI: What you need to know about Trade Protection/America rethinks its free-trade tradition as tide of imports rises. Two years later, it's still unclear whether tariffs have helped Harley-Davidson
Milwaukee — TRADE protection is like a rickety rowboat. It's cumbersome. There are many leaks. Often, it is doomed to sink. But once in a while, it can help you cross the river. Right now, many in the motorcycle industry are wondering whether trade protection is helping Harley-Davidson Motor Company.
``It's an imperfect process,'' says Vaughn Beals, president of the Milwaukee-based manufacturer. ``We had to be a flaming optimist to even start.''
In 1983, the future of this venerable company -- the only remaining US motorcycle maker -- looked bleak. Japanese motorcycles were eating into sales of Harley's line of heavy and more expensive machines. But, in April of that year, President Reagan granted the US company stiff tariff protection for five years.
Now, nearly halfway through the tariff period, Harley still faces a stiff challenge from the Japanese. It is hard to discern the impact this temporary protection measure has had.
``They've gained some time,'' says Paul Gordon, feature editor of Cycle magazine. But other problems, including high debts, have dimmed the company's prospects, he adds.''
``I think what it did, and what it did solely, was [to get] their attention,'' says president Beals about the impact on the Japanese. In bringing its case before the International Trade Commission, Harley had argued that the Japanese were flooding the US market without any regard to sales. An estimated 18 months of inventory had built up -- and it was only the tariffs that finally put the Japanese companies on notice that they had to moderate their production, he says.
The tariffs may still significantly help Harley, once the huge backlog of motorcycles is sold. But so far, the Japanese have gotten around the trade barriers to some extent. Two Japanese companies are assembling some of their motorcycles at their US factories, which are not subject to the tariff. The Japanese also have downsized some of their engines to avoid the tariff, which was imposed only on large motorcycles (700 cubic-centimeter displacements and above).
Economists -- even many free traders -- support the idea of limited and temporary protection.
``There are conditions where this can help,'' says John S. Odell, visiting fellow at the Institute for International Economics. For example: A country's infant industries sometimes need extra help before they can stand on their own two feet. Older companies, such as Harley, might need a period of time to adjust to new foreign competition.
Here at the company's Milwaukee factory, the improvements in assembling motorcycle engines have been dramatic. Just-in-time delivery -- a system of making parts only as they are needed -- has reduced inventory costs and the need for three large storerooms. Efficiency and quality have also been improved.
``I haven't made a bad part in seven months,'' says one factory worker, who used to scrap or rework 15 to 20 percent of his production.
These improvements were begun several years before Harley received its tariff barriers -- a fact that helped the company make its case, Beals says.